Jim Sutton speech to NZ-Korea Business Council

Chairman
Giff Davidson, Ambassador Chong, members of the Korea/New
Zealand Business Council, thank you for the invitation to
speak today.

It’s appropriate to talk to you this week,
when New Zealand, Korea, and the other 140 members of the
World Trade Organisation are still basking in the glow of
getting a new world trade negotiations round
underway.

After six days of intense negotiations in
Doha, Qatar, ministers were successful in finding a
compromise that all members could agree on. With 142
members, finding consensus can be a bit of a drawn-out
process.

There is no voting or majority rule in the WTO -
all must agree or nothing is agreed. It makes for
interesting discussions!

The launch of the new round
at Doha, and the increasingly liberal trade rules we
expect will flow from it, should translate directly into a
more open and prosperous economic relationship between New
Zealand and Korea.

The multilateral focus on the new
round means that attention on bilateral agreements is likely
to be distracted.

New Zealand continues to support
bilateral free trade agreements that are comprehensive in
scope and compatible with WTO and APEC commitments. New
Zealand ‘s interest in further exploring a Closer Economic
Partnership with Korea remains. We appreciate that
Korea’s immediate priority is its pioneering free trade
negotiations with Chile. The ball is in Korea’s
court.

I would like to acknowledge the strong support
that Business Council has provided to the concept of a CEP
with Korea.

On the bilateral front, Korea is New
Zealand’s fifth largest trading partner and exports to Korea
are at an all time high. Our total merchandise exports for
the year ended August 2001 reached $NZ1,450 million.
That represents an increase of 19.3 percent over the same
period last year and almost $NZ500 million more than
pre-Asian financial crisis levels.

On the services side,
tourist and student flows from Korea are also showing good
growth. The number of Korean visitors to New Zealand for
the year ending September 2001 increased to 83,119 compared
with 63,194 in the same period last year.

The government
has agreed to increase the number of flights from Korea over
the summer as Korean travelers switch to what they
perceive as safe Australasian destinations. We hope that
will help to cushion the tourism industry in both
countries from the effects of the 11 September terrorist
attacks.

Despite the active trade relationship shared by
New Zealand and Korea, the backlog of requests for new or
improved access for New Zealand agricultural products is
an ongoing concern. On current count we have around
15 requests or issues before the Korean government
including 4 horticultural products and 5 live animal
issues. We have also been actively pursuing access for
sliced deer velvet (and hope to finalise arrangements early
next year) and are discussing with Korean agencies the
introduction of new requirements for GMOs, BSE
certification, dairy products and so on.

The lack of
progress is disappointing given assurances we have received
at the highest levels that our requests would be treated
expeditiously.

Let me stress that we are not
unsympathetic towards Korean sensitivities about animal
health and food safety issues. On the contrary, as a leading
agricultural producer we know that maintaining proper
standards is vital. The issue for us is how Korea’s import
standards are set and administered.

Our efforts to
provide new products to the Korean market are hindered by
slow responses on the part of Korean technical agencies.
When responses are finally received, we invariably find
that Korea’s proposed import requirements are in excess of
internationally accepted standards and ignore established
disciplines, such as equivalence.

My assessment is that
the obstacles faced by New Zealand exporters of
agricultural products to the Korean market are amongst the
most difficult found anywhere.

One example may help to
illustrate the problems we face. A New Zealand exporter
wishes to tranship live honey bees destined for North
America and Europe through Korea. The exporter already
exports to Korea and has a good relationship with Korean
Airlines which actively seeks the cargo business. However,
the Korean authorities have insisted on expensive testing
for the disease varroa, even though the destination
countries do not require it and varroa has been detected
in Korea. This makes transhipments commercially unviable.
Although the request to remove the testing requirement had
been with the Korean authorities for 18 months and a
response was sought on numerous occasions, it was not
until we raised the issue at a side-bar meeting in the WTO
last year that a response was received. And even then it was
negative! However, because we believe the requirement
represents a clear technical barrier to trade we have
continued to press the Korean authorities to remove the
testing requirement in time for this year’s export
season.

So what can the government do to assist in cases
like this?

- The first point is that we are in
continual contact with Korean agencies on these
issues through our embassy in Seoul, in MAF-to-MAF
channels and in New Zealand-based dealings with the Korean
Embassy.

- Second, we continue to try and improve
Korean technical agencies’ understanding of NZ MAF
assurance systems through inward and outward visits.
The Customs Agencies of both countries have built up an
excellent working relationship - an official from the
Korea Customs Service is on secondment in Auckland at
present. There is scope for our quarantine agencies to
develop similar linkages.

- We also use
opportunities such as the annual Korea/New Zealand Joint
Economic Committee and high-level political meetings to
pursue our requests.

- And finally in cases
where we consider bilateral avenues have been exhausted
we will not shy away from referring systemic and specific
issues to relevant WTO committees for consideration.

In
short we use whatever opportunity we can to move positions
forward. But there are important systemic issues which I
believe the Korean government needs to address.

In
addition, we will continue to build a constituency for New
Zealand in Korea. Recently for example we have sponsored
Korean consumer groups to visit New Zealand using our
Trade Access Support Programme. That allows them to see
first hand our food production and food safety systems, and
helps to allay concerns about imports.

The Business
Council can greatly assist these efforts by encouraging its
Korean partners and importers of New Zealand product to
be more vocal in their support for improved access
conditions.

The rules based system of international
trade provided by the World Trade Organisation has
provided tangible assistance to New Zealand in trade
access to Korea. This is most evident in the full
liberalisation of the Korean beef market and most recently
with the removal this year of retail restrictions on
imported beef, in compliance with the ruling of the WTO.
This was pleasing to see and has been good news for both
Korean consumers and New Zealand exporters.

Agriculture,
of course, is not the only area in which we seek to do
better in our relations with Korea. We also need to
look ahead at the opportunities in new fields, in
particular the hi-tech sector and services. The Prime
Minister and the business delegation that accompanied her
to Korea in May put particular emphasis on opportunities in
these areas.

Both governments are committed to
transforming their economies into knowledge-based
economies. Already Korea has undertaken some impressive
initiatives. It has a bold vision.

By the year 2025 it
is aiming to rank among the top seven nations in the world
in the competitiveness of its science and technology.
Already its investment in broadband technology leads the
world in the number of users. Internet penetration is about
49% of the population.

E-commerce is also expanding
rapidly in Korea. For example - in the last quarter of
2000 internet sales in Korea rose almost 40% to
US$532.5 million.

The challenge for New Zealand, as a
small player, is to get on Korea’s radar screen. Our
technological skills are simply not known in Korea. The New
Zealand government is encouraging more science and
technology linkages because we see them as fundamental to
the economic partnership we want to have with Korea in the
future. But we need the interest of the science and
business communities in New Zealand if tangible links
in research and commerce are to be developed.

The
opportunities are significant because just as there are
complementarities in our traditional trade relationship
there is also complementarity between our two knowledge
economies.

New Zealand has a proud scientific history of
basic innovative research, whereas Korean companies are very
good at transforming research into mass-produced consumer
goods.

Korea is embracing the challenges of
globalisation on the education front too, and New Zealand
is well positioned to assist in providing education and
training in an English-language environment. The number
of Koreans learning English in New Zealand and
attending secondary and tertiary institutions has shown
growth of around 40% over the last year. But we are still
not back to where we were prior to the 1997 economic
crisis.

And only a few NZ institutions have taken what
I would call a strategic approach to the Korean market.
The “New World Class” brand developed by Education New
Zealand is a good move on the marketing front. But there is
much scope for institutions to research likely trends,
form partnerships with Korean educational institutions,
and tailor educational products to best utilise human and
capital resources here in New Zealand while meeting specific
Korean needs.

Education New Zealand and TradeNZ have
made Korea a priority market for education services. I
hope members of the Council with an interest in education
will support this decision by investing effort in this
important market.

Film and television production is
another area where New Zealand has developed considerable
skills and technologies and where there is scope to develop
some exciting partnerships with Korea. I applaud the
initiative of Trade New Zealand and the Film Export Network
in participating in the Busan International Film
Commission Showcase earlier this month, as part of the
strategy of attracting production and post production
work from Asia. Former Business Council Chairman Michael
Stephens was part of the New Zealand team in Busan. I
look forward to hearing about the outcome of the
mission.

In particular we need to raise our quality
profile in Korea. New Zealand has a favourable image -
a nice place to visit and a good source of agriculture
and food products. But this is not necessarily the image
that helps us sell education and services. We need to
persuade Koreans that we are a smart, innovative society.
This will require a sustained effort by all of those
involved in the services sector.

One resource that I do
not believe we have used to best advantage are those Koreans
who have chosen to settle in New Zealand -the majority of
whom live here in Auckland. They are the “brain gain”
which compensates for the “brain drain” we often hear
about.

The quality of migrants here and their
settlement outcomes is just as important as the quantity
of immigrants we attract. We need to encourage more
migrants to establish innovative new businesses in New
Zealand that will grow our economy.

I am encouraged when I
hear of new trade that has developed in recent years because
of Korean immigrants using their networks in both countries.
But I would like to see more new companies being
established by our Korean migrants.

In this connection
I have been encouraged by several initiatives here in
Auckland. The Chamber of Commerce deserves credit for its
matchmaking role between new migrants and potential
employers. The Auckland City Council is looking at how it
can help migrants in the business field.

And I know that
the Auckland University of Technology is investigating the
possibility of incorporating into its business
incubator programme a special incubator and related
services for Korean business people who might want to use
this way of setting up in NZ. These are exactly the sorts
of initiatives that we need to make the most out of our
economic relationship with Korea.

Let me conclude with
a request to the Business Council - to reach out to the
Korean community in New Zealand and assist them with the
process of becoming familiar with business norms here. If I
were to hazard a guess, I would say that our ability to
make the best use of the human capital in areas like
migration and education will determine how far and how fast
we can take the relationship in the years ahead.

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